RELATED PARTIES TRANSACTIONS

12 Months Ended

Dec. 31, 2013

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

7. RELATED PARTIES TRANSACTIONS

Notes payable – related parties

Notes payable – related parties consists of the following at December 31, 2013:

Promissory note payable to the Chief Executive Officer of the the Company, unsecured, bearing interest at 7.5% per annum, due in monthly principal and interest payments of $7,050, maturing on August 1, 2013.	$	49,702
Promissory note payable to the non-employee Board of Director, secured by up to $200,000 in and to all of the Company’s right, title and interest in its fixed assets, inventory, receivables, and all documents including its books, records, and files; bearing interest at 21.21% per annum, due in monthly principal and interest payments of $8,585, maturing on November 1, 2014.		77,917
		127,619
Less amounts due within one year		127,619
Long-term portion of notes payable	$	--

As of December 31, 2013, principal payments on the notes payable – related parties are as follows:

2014	$	127,619
2015		--
2016		--
2017		--
2018		--
Thereafter		--
	$	127,619

As of December 31, 2013, the Company was approximately nine months in arrears on principal payments due under the Note payable to the Chief Executive Officer. On May 13, 2013, the Company granted the Chief Executive Officer 370,371 shares of common stock (restated for reverse stock split, see Note 18. CHANGE IN CAPITAL STRUCTURE) in satisfaction of $50,000 of note payable – related parties. The shares of stock were issued at the fair market value, or trading price, on the date of the transaction. No default notice has been received and the Company makes monthly payments to not fall further behind until it is able address past due payments.

On October 30, 2013, the Company signed a secured promissory note, with Mikkel Pitzner, the non-employee Board of Director (BOD) for $85,000. In addition to the terms of the Note Payable disclosed in the table above, the Company was to use its best efforts to settle the Branch Banking and Trust (“BBT”) Judgment and terminate all Uniform Commercial Code filings in favor of Mr. Pitzner within 10 business days of the date of the agreement. As further inducement to make the loan, Mr. Pitzner was granted an option to purchase 1,802,565 shares of the Company’s common stock for $.01 per share. The option is exercisable immediately and will continue for a period ending two years from the agreement date with an option for cashless exercise based on a formula within the agreement. The closing price per share of the Company’s stock closing on the OTCBB on the date of the agreement was $.025 per share. As a result of the option granted, the Company recorded approximately $44,610 stock option expense using the Black-Scholes valuation model on date of the agreement. See Note 17. COMMITMENTS AND CONTINGENCIES, for November 20, 2013, Satisfaction of BBT Final Judgment.

Notes payable – related parties – consists of the following as of December 31, 2012:

Promissory note payable to the Chief Executive Officer of the Company, unsecured, bearing interest at 7.5% per annum, due in monthly principal and interest payments of $7,050, maturing on August 1, 2013.	$	168,384
Less amounts due within one year		168,384
Long-term portion of notes payable – related parties	$	--

As of December 31, 2012, the Company was approximately twenty months in arrears on principal payments due under the Note payable to the Chief Executive Officer.

Net revenues and accounts receivable – related parties – The Company sells products to three entities, Brownie’s Southport Divers, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys, owned by the brother of the Company’s Chief Executive Officer. Terms of sale are no more favorable than those extended to any of the Company’s other customers. Combined net revenues from these entities for years ended December 31, 2013 and 2012, was $836,872 and $804,381, respectively. Accounts receivable from Brownie’s SouthPort Diver’s, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys at December 31, 2013, was $11,926, $6,116, and $3,047, respectively. Accounts receivable from Brownie’s SouthPort Diver’s, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys at December 31, 2012, was $27,759, $15,226, and $8,457, respectively. Sales to Pompano Dive Center for the years ended December 31, 2013, and 2012, was $23,322 and $11,531, respectively. Accounts Receivable from Pompano Dive Center at December 31, 2013, and December 31, 2012, was $14,029, and $5,863, respectively. See Note 18. JOINT VENTURE EQUITY EXCHANGE AGREEMENT for further discussion regarding Pompano Dive Center. Sales to the Company’s Chief Executive Officer for the years ended December 31, 2013, and December 31, 2012 was $1,097 and $50, respectively. Sales to Brownie’s Global Logistics. LLC and 940 Associates, Inc., companies owned by the Chief Executive Officer, were $80,613 and $4,340, respectively, for the year ended December 31, 2013, and $0, for the year ended December 31, 2012. Accounts receivable from Brownie’s Global Logistics, LLC at December 31, 2013 was $70,823 and the receivable related to a sale in the 4^th quarter of 2013, was paid within terms in January 2014.

Royalties expense – related parties – The Company has Non-Exclusive License Agreements with 940 Associates, Inc. (hereinafter referred to as “940A”), an entity owned by the Company’s Chief Executive Officer, to license product patents it owns. Under the terms of the license agreements effective January 1, 2005, the Company pays 940A $2.00 per licensed product sold, rates increasing 5% annually. Also with 940A, the Company has an Exclusive License Agreement to license the trademark “Brownies Third Lung”, “Tankfill”, “Brownies Public Safety” and various other related trademarks as listed in the agreement. Based on this license agreement, the Company pays 940A 2.5% of gross revenues per quarter. Total royalty expense for the above agreements for the years ended December 31, 2013 and 2012, is disclosed on the face of the Company’s Consolidated Statements of Operations. As of December 31, 2013, and December 31, 2012, the Company was approximately twenty-six months in arrears on royalty payments due. No default notice has been received and the Company plans to make payments as able.

Non-employee Board of Director Fees, loan conversion, and bonus – In April 2011, the Board of Directors approved a director compensation plan whereby each non-employee director would be paid the equivalent of $2,500 per month by the Company. One of the two non-employee Board of Directors (“BOD”), of the three person BODs, which included the Chief Executive Officer, resigned his position on April 18, 2012. As of December 31, 2012, $22,500 of the accrued BOD fees had been converted to stock, leaving $15,000 still due and unpaid, $7,500 due from first quarter of 2012 to the BOD who resigned, and $7,500 due Mikkel Pitzner from fourth quarter of 2012. Because the remaining non-employee BOD, Mr. Pitzner, now accounts for 50% of the BODs, the Company reclassified him to related parties as of April 2012. See Other liabilities and accrued interest - related parties below for inclusion of the $7,500 payable to him as of December 31, 2102. Prior to April 2012, the two non-employee BOD were not classified as related parties. Non-Employee Board of Directors’ fees (related and unrelated parties) for the years ended December 31, 2013 and 2012, was $27,500 and $37,500 (paid in BWMG stock), respectively. Effective December 23, 2013, the BODs cancelled the $2,500 per month non-employee BOD compensation agreement on a go-forward basis. In addition, Mr. Pitzner forgave the $27,500 BOD fees due and or paid him through November 2013, for the year ended December 31, 2013. Related to the forgiveness of the BOD fees for 2013, the Company cancelled stock payable to him, recorded $5,917 receivable for the stock due back from him, and recorded the $27,500 as contribution to Additional Paid in Capital.

On June 20, 2012, Mr. Pitzner converted a $20,000 short-term loan to restricted shares per BOD consent at fair market value of the stock. In addition, on February 23, 2013, the Company declared a bonus payable for the years ended 2012 for certain employees, service providers, and consultants. As part of this bonus, Mr. Pitzner was awarded restricted shares of common stock with $73,000 fair market value. This amount is included on the statement of stockholders’ deficit as shares payable as of and for the years ended December 31, 2012. The shares were issued to Mr. Pitzner during the first quarter ended March 31, 2013.

Equity based compensation to employee – During the year ended December 31, 2013 the Company converted $54,000 of accrued payroll to 959,870 shares of restricted stock for services rendered by Alexander F. Purdon in 2013 based on the weighted average price per share during the months the services were rendered. During the year ended December 31, 2012, the Company converted $99,000 of accrued payroll due him to 16,537 shares of restricted stock payable for services rendered in 2012 and 2011, also based on the weighted average price per share during the months the services were rendered. Mr. Purdon, owned stock in the Company prior to agreeing to accept stock in lieu of cash for employment compensation. As a result, Mr. Purdon exceeded 10% ownership in 2013, and is now accounted for as a related party.

Patent purchase agreements – In the first quarter of 2010, the Carleigh Rae Corporation (herein referred to as “CRC”), an entity that the Company’s Chief Executive Officer has an ownership interest, transferred ownership rights to the Company of patents previously subject to Non-Exclusive License Agreements. Effective September 24, 2010, the Company finalized and executed terms of the purchase from CRC for payment of $25,500 and nominal shares of the Company’s common stock. In addition, the principals of CRC were entitled to a percentage of future sales amounting to $8,250 of products the Company is to receive in conjunction with two patent infringement lawsuits settled in the third quarter of 2010. See Other liabilities and accrued interest– related parties below for inclusion of $6,017 remaining from the original $8,250 liability due the Principals of

CRC. By acquiring the IP the Company (i) has an opportunity to further develop the IP, (ii) has the ability to incorporate the IP into current and future products, and (iii) has the opportunity to license the IP to third parties.

Other liabilities and accrued interest– related parties

Other liabilities and accrued interest– related parties consists of the following at:

	December 31, 2013		December 31, 2012
Year-end 2012 bonus payable to Chief Executive Officer	$	67,000	$	67,000
BOD fee payable to non-employee – related parties		--		7,500
Due to Principals of Carleigh Rae Corp., net		6,017		6,017
Other liabilities – related parties	$	73,017	$	80,517

The $6,017 due to the Principals of the Carleigh Rae Corp. is part of the patent infringement settlements received by the Company and is discussed above as is the non-employee BOD Fee.

Restricted common stock issued for personal guarantee – On April 21, 2011, the Company granted Robert Carmichael, the Chief Executive Officer, 14,815 shares of restricted common stock in consideration of personal guarantees he provided to secure restatement and consolidation of the first and second mortgages of the Company. The restrictions on the common stock expired 50% on April 20, 2012, and 50% on April 20, 2013, since Mr. Carmichael continued his full time employment with the Company. The Company valued the stock at determined fair market value per share on the date of the transaction and has recorded $1,000,000 of compensation expense to Mr. Carmichael ratably over the two-year term in which the restrictions expired. The unearned balance of the compensation was recorded as prepaid compensation as a component of shareholders’ deficit. For the years ended December 31, 2013 and 2012, the Company recognized $137,494 and $500,004, respectively, as amortization of prepaid compensation under this agreement. Prepaid compensation remaining under this agreement as of December 31, 2013, and December 31, 2012, was $0 and $137,494, respectively, and is reflected as a component of Stockholders’ Deficit.

Stock options outstanding from patent purchase

Effective March 3, 2009, the Company entered into a Patent Purchase Agreement with Robert M. Carmichael, the Chief Executive Officer of the Company. The Company purchased several patents it had previously been paying royalties on and several related unissued patents. In exchange for the Intellectual Property (“IP), the Company issued Mr. Carmichael 234 stock options (adjusted for 1 –for– 1,350 reverse stock split) at a $1,350 exercise price with expiration ten years from the effective date of grant, or March 2, 2019. None of the options have been exercised to-date.

Equity based compensation for Chief Executive Officer– On November 2, 2012, the BOD approved a stock incentive bonus to certain key employees and consultants to vest and pay out on May 2, 2013, contingent upon continued employment or services. The stock bonus price per share was calculated based on last closing price per the OTCBB on the effective date of the transaction, or for a total of $75,100. Shares were set aside and reserved for this transaction. Of the $75,100 bonus, $45,000 was awarded to the Chief Executive Officer of the Company. The Company recorded compensation expense ratably over the vesting period. See Note 21. EQUITY BASED INCENTIVE/RETENTION BONUSES for further discussion. In addition, on February 23, 2013, the Company declared a bonus payable for the years ended 2012 for certain employees, service providers, and consultants. As part of this bonus, the Chief Executive Officer was awarded $67,000 to be paid out in cash or stock based on later determination by the BOD. This amount is included in operating expense for the year ended December 31, 2012. See table above for inclusion in other liabilities and accrued interest – related parties. Further, pursuant to a Written Consent of the BOD of the Company on June 11, 2012, clarifying a meeting held on May 31, 2012, the BOD declared an $83,333 bonus due the Chief Executive Officer payable in shares of restricted stock. The shares vested as of January 2, 2013. The grant price per share was based on the closing price of the stock on May 31, 2012. For accounting purposes, the Company recognized $83,333 operating expense ratably over the seven months the share vested. Lastly, the Chief Executive Officer’s monthly salary was increased by $16,667 per month beginning in June 2012, payable in restricted stock calculated based on a monthly weighted average share factor of .70, or a 30% discount (“incremental salary”). The shares were to vest six months after the last day of each month, continued employment was requirement for vesting, and shares would not be issuable until vested. The Company recorded $23,801 operating expense each month related to the incremental salary, which was $16,667 plus $7,144 discount added back to record at full monthly weighted average price per market. On December 23, 2013, the Chief Executive Officer forgave all incremental salary shares payable to him by the Company from 2012 through November 2013. As a result, the Company recorded $428,578 contribution to Additional Paid in Capital for the year ended December 31, 2013, for the cancellation of the $261,904, and $166,667 stock payable from 2013 and 2012, respectively.